Japan Stocks Fall as Nikkei Enters Bear Market on U.S. Concern

Aug. 24 (Bloomberg) -- Japanese stocks fell, dragging the
Nikkei 225 Stock Average into a bear market before an industry
report that may show U.S. sales of existing homes plummeted in
July, and as the yen strengthened.

“Even though we don’t think the U.S. is moving into a
recession, there are concerns about a double dip,” said Kenji
Sekiguchi, general manager of strategic research and investment
at Mitsubishi UFJ Asset Management Co., which oversees about $73
billion in Tokyo. “The yen is the biggest worry for Japan, and
unless we see policies on this, stocks will continue losses.”

The Nikkei 225 Stock Average dropped 1.3 percent to
8,995.14 in Tokyo, its lowest close since May 2009. The gauge is
more than 20 percent below its 18-month high on April 5, the
level some analysts regard as a bear market. The broader Topix
index declined 0.9 percent to 817.73, with about two stocks
retreating for each that rose.

The Nikkei has fallen 15 percent this year, the most among
benchmark indexes in the world’s five-largest developed
countries, as the yen strengthened and concern grew about
slowing growth in China, Europe and the U.S.

U.S. Home Sales

The measure’s decline has cut the average price of stocks
in the gauge to 16 times estimated earnings, close to the lowest
level since December 2008.

Futures on the Standard & Poor’s 500 Index declined 0.4
percent. Yesterday, the gauge slumped 0.4 percent in New York as
speculation the economy will slip into another recession offset
investor optimism amid more than $1 trillion in takeovers this
year.

Yen, New Homes

A report today by the Chicago-based National Association of
Realtors will show U.S. July sales of existing homes plummeted
12.9 percent from June, the biggest monthly loss of 2010,
according to the median estimate of economists surveyed by
Bloomberg.

New-home sales, which account for less than a 10th of U.S.
housing transactions, stayed at the second-lowest level on
record last month, economists predict Commerce Department data
will show tomorrow.

“The market is expecting the U.S. housing data to show bad
results,” said Fumiyuki Nakanishi, a strategist at Tokyo-based
SMBC Friend Securities Co. “And as concern about the U.S.
economy grows and the yen continues strengthening, investors are
having to wait on the sidelines.”

The yen rose to as much as 84.86 against the dollar today
in Tokyo from 85.37 at the close of stock trading yesterday.
Against the euro, the yen climbed to as much as 107.22 from
108.51. A stronger yen reduces overseas income at Japanese
companies when converted into their home currency.

Softbank, NTT DoCoMo

The yen climbed to a 15-year high against the dollar this
month and is on course for its strongest annual average level
since currencies began trading freely in 1971, according to data
compiled by Bloomberg and based on each day’s close.

“In Japan, the policy makers do nothing, and as the yen
continues to strengthen against the dollar and the euro, there
seems to be no end to the slap in the face of exporters,” said
Tsutomu Yamada, a market analyst at kabu.com Securities Co. in
Tokyo.

Softbank Corp. lost 1.8 percent to 2,423 yen. Japan
Communications Inc., which provides mobile phone services, will
offer a Subscriber Identity Module, a chip that allows unlocked
iPhone 4s to use NTT DoCoMo Inc.’s network, the company said
yesterday before the stock market close in Tokyo. NTT DoCoMo
climbed 0.1 percent to 142,200 yen.

Pharmaceuticals Gain

The Topix Pharmaceutical Index increased 1 percent, the
biggest gain of only three groups that rose today among the
Topix’s 33 industry gauges.

“Amid insecurity about the growth of the global economy,
investors are unwilling to buy exporters and cyclical stocks,”
said Yumi Nishimura, an equity-market analyst at Daiwa
Securities SMBC Co. “Investment funds are flowing into
defensive stocks, such as pharmaceutical shares.”

Japanese stocks briefly pared declines in the afternoon
session after a Citigroup Inc. report said slowing global growth
will likely lead the Chinese central bank to keep its interest
rates low. The Topix was down only 0.4 percent at 12:41 p.m.
after dropping as much as 1.3 percent in the morning.

China Rises

Fanuc Ltd., an industrial robot maker that receives almost
half of its revenue from Asia, rose as much as 0.3 percent. It
fell 1.2 percent to 9,250 yen at the close of stock trading.
Hitachi Construction Machinery Co., which counts China as its
biggest market, pared declines to 0.3 percent before falling 1.3
percent to 1,665 yen. Nippon Yusen K.K., the shipping line which
counts Asia excluding Japan as its biggest source of revenue,
was unchanged after the midday break. It closed 1.5 percent
lower at 339 yen.

“A low interest rate in China is good for Japanese
companies who generate a large part or growing base of revenues
there and who also have Chinese production sites and
operations,” said Jamie Coutts, Singapore-based technical
analyst and sales manager at BGC Partners.